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What Health Care Reform Means for: Those Already Insured

Using results from a questionnaire we did with American Public Media’s Public Insight Network, we’re looking at how the proposed health care reforms will actually affect people facing common health care coverage situations. See our previous posts on what health care reform means for the uninsured, the underinsured, small businesses, and those enrolled in Medicare programs.

Tracy Bullion, 46

Location:Fort Wayne, Ind.Health Care Status:Happy with her insurance — and worried about the cost of reform.Household Income:$110,000

Her story:

Tracy Bullion and her husband -- along with their three kids, ages 11, 14 and 18 -- are happy with their health insurance, which they get through her husband’s employer. “We’ve got good eye, good dental,” she says. “And we’ve worked a long time for it.”

The Bullions pay about $350 a month for a premium. The family has enjoyed good health, except for a lump in Bullion’s breast last year, which turned out to be benign. Their payments for tests on the lump amounted to “$50 here, $100 there,” she said.

Bullion worries that an expanded government role in health care, including a public option, would negatively impact the coverage she has – and the federal budget.

“I just hope that we see a bill out there that makes sense, that isn’t going to put us in such deep, deep debt to where our children and grandchildren are going to be paying for it for the rest of their lives,” she said.

What changes would mean for her:

Neither the House nor Senate bill would require the Bullions to change plans, and the cost of their health insurance probably wouldn’t change much -- but lenient penalties might lead some companies to drop their coverage.

Both the House and Senate bills allow people who are happy with their coverage to keep it, unless it is below a minimum standard, in which case they would have to pay a tax penalty. Since Bullion’s coverage meets the minimum coverage standards set out in both bills, she and her family would not be affected.

There are concerns about employers pushing workers off to public programs, and indeed it has happened before. (See this excellent report on large employers whose workers get coverage through Missouri Medicaid.)

The House and Senate bills include tax penalties for employers over a certain size that choose not to offer coverage – but the Senate’s penalty would be much smaller.

Under the House plan, most employers – including Mr. Bullion’s – would be required to provide health insurance, or else they would be fined 8 percent of their total payroll. But that might actually cost less than paying for insurance itself, because more than half of employers currently pay 10 percent or more of their payroll for health insurance.

The Senate plan would take an even gentler approach. Large employers wouldn’t have to offer health coverage. But for each employee who qualified for a government subsidy to buy insurance – those making less than four times the federal poverty level -- the business would be fined $750 annually. That’s far less than the roughly $4,000 that companies pay on average now for single employee coverage.

Again, employers would have to decide if the benefits of continuing to offer coverage, such as employee morale and avoiding the fine, made it worthwhile. But more businesses might decide that it made sense to end coverage and instead just pay the relatively small fine.

Of course, currently employers can drop insurance benefits with no penalty, and many are doing so as the economy tanks and costs continue to rise.

The reforms being proposed could put some upward pressure on premiums, because both the House and Senate plans would require a comprehensive benefits package. That means all insurance plans would have to offer things like pediatric exams, hospitalization and prescription drugs. In general, the more comprehensive a plan’s coverage, the more it costs. Rules against turning down people with pre-existing conditions are in both bills, and a cap on deductibles in the House bill could also drive up premiums.

On the other hand, proponents of health care reform, including President Barack Obama, have argued that health care providers charge insured people more for health care to recoup the cost of care for the uninsured. Reducing the number of uninsured people could reduce the cost of some kinds of care, potentially reducing premiums. But the evidence of this is somewhat limited.

An analysis of the Senate proposal, by the nonpartisan Congressional Budget Office, did indeed find that the cost of coverage in the individual market would go up about 10 to 13 percent, although that effect would be cancelled out for about half of the people buying insurance on their own because they would receive subsidies.

For people who, like Bullion, purchase insurance through the large group market - an estimated 70 percent of people under the Senate proposal - the CBO found the Senate bill would have a “negligible” effect on the cost of insurance.

The answer to how much the reform proposals would cost taxpayers is nearly as complicated. According to CBO estimates, the Senate plan would include $848 billion in new federal spending over 10 years, and the House plan calls for an eye-popping $1.05 trillion in new spending. Either way, it sounds like a huge drain on the federal budget.

But not so fast.

Both plans would offset the new spending with reductions in other federal health care costs and new sources of revenue.

Under the Senate plan, changes to Medicare, the penalties individuals and businesses would pay for not having insurance, and revenue from taxes on so-called “Cadillac” insurance plans and the health care industry, would generate $859 billion. Taking that into account, the Congressional Budget Office estimates that the Senate plan would actually reduce the deficit by $130 billion over the next 10 years.

The House plan would make many of the same changes, except it would impose a 5.4 percent surcharge on adjusted gross incomes of more than $500,000 for singles and $1 million for joint filers instead of the tax on high-cost insurance plans.

Taking that into account the House plan would reduce the federal deficit by an estimated $138 billion over 10 years, according to the CBO.

The decades after 2010-2019 would be more expensive because many of the reform provisions would not kick in until halfway through this decade, but the cost savings and taxes would start much sooner. For 2020-2029, the CBO estimate is that the plans would basically break even, or result in a small decrease of the federal budget deficit.

This all presumes, of course, that the revenue-raising measures, some of which have already drawn ire, actually make it into the final legislation intact. As some longtime observers of health care reform, like Washington Post columnist David Broder, have pointed out, Congress has struggled before to make some of the proposed changes – especially those pertaining to Medicare.

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